A Fresh Look at the Indian Business Climate

January 9, 2014

This study focuses on the needs and aspirations of Indian entrepreneurs. Conducted as a joint collaboration between the American Enterprise Institute (AEI) and YouGov, an online polling agency, a survey of 594 Indian business leaders was administered in June 2013 to gauge the factors and business conditions that enable businesses to conduct their day-to-day operations. These factors and conditions include, for example, infrastructure, government corruption and taxes. The study is meant to inform politicians, policymakers, and the people of India about what works and what does not work in the Indian business environment, says Aparna Mathur, a resident scholar at the American Enterprise Institute.

Major findings include:

Most entrepreneurs consider business "good" or "extremely good" -- 72 percent reported so. Only 10 percent reported that business conditions in their state were "extremely poor" or "poor."

Corruption, inadequate infrastructure and taxes are top concerns. Approximately 50 percent of entrepreneurs reported these factors to be somewhat or extremely problematic.

Labor laws are another universal issue. Fifty-four percent of respondents said labor costs were too high, 47 percent reported difficulties in hiring workers and 46 percent reported problems firing workers. Another 46 percent reported that unionization was a problem for them in their business.

An overwhelming 60 percent of entrepreneurs reported that the Bharatiya Janata Party (or National Democratic Alliance) would best represent their interests at the center.

In general, the survey suggests that although India may have improved its business environment significantly since liberalization, challenges still remain along several fronts. The survey aims to identify the problem areas by talking to the entrepreneurs themselves and highlighting their struggles. If policymakers heed these concerns and undertake reforms to address these problems, the returns to that investment of time and effort could be tremendous.